Production of highly optically active C3 and C4 chlorohydrins was developed by using the bacteria stereoselectively dehalogenating and assimilating the racemic substrate: Pseudomonas sp. and Alcaligenes sp. These bacteria stereoselectively assimilate (RS)‐2,3‐dichloro‐1‐propanol (DCP) and (RS)‐3‐chloro‐1,2‐propanediol (CPD) followed by microbial preparation of (R)‐ and (S)‐DCP, and (R)‐ and (S)‐CPD with >99% ee. A novel dehalogenating enzyme, halohydrin dehydro‐dehalogenase from one of the above strains, Alcaligenes sp. DS‐S‐7G, was applicable for preparation of optically active 1,2‐diols with 60–99% ee. Moreover, microbial resolution of C4 chlorohydrins with whole cells of Pseudomonas sp. was carried out. This resolution reaction using the resting cells gave (R)‐ and (S)‐4‐chloro‐3‐hydroxybutyrate (CHB) and (S)‐4‐chloro‐3‐hydroxybutyronitrile (BN) with >98% ee. In the case of the resting cells of Enterobacter sp., both (R)‐CHB (>99% ee) and (S)‐3‐hydroxy‐γ‐butyrolactone (95% ee) with excellent yield were obtained. Also, some typical synthetic applications using the above chiral C3 and C4 synthons were introduced: ferroelectric liquid crystals, optically active β‐blockers, and other chiral pharmaceuticals. Chirality 10:682–692, 1998. © 1998 Wiley‐Liss, Inc.